North America

Earnings Preview: Expedia Inc Q2 2017 (EXPE)

By: Craig Bowles

Overview

Expedia, Inc. (EXPE) is slated to report 2Q 2017 earnings after the bell on Thursday, July 27th. The earnings release is expected at approximately 4:00 p.m. ET followed at 4:30 p.m. with a webcast presentation available through Expedia Investor Relations. As one of the top global online travel agents, Expedia’s earnings could influence the direction of index futures and other broad market gauges.

Outliers & Strategy

Key measures:

  • Adjusted Earnings Per Share (EPS): The current Street estimate is $0.93 (range of $0.76 to $1.06. (Source: Yahoo! Finance) Consensus was $0.95 three months ago.
  • Revenues: Analysts expect an increase of 15.5% y/y to $2.54 bln (range $2.45 bln to $2.66 bln).
  • Expedia shares trade at a Price/Book of 5.7 versus the 5-year average of 4.5; Price/Sales 2.6 vs 5-year average of 2.1; and Price/Cash Flow of 11.2 vs 5-year average of 11.1. Dividend yield of 0.7% compares to a 5-year average of 0.8%.
  • Analysts view Expedia with 19 Buy, 6 Hold, and 0 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 38,043 shares over the last three months and sold 24,007,332 shares in the past year. (source: NASDAQ.com)  Buybacks had been running at $500 mln per year except for 2015’s $61 mln but picked back up in 2016. Buybacks pulled back was in 2007 in the face of economic worries.
  • Expedia, Priceline (PCLN) , and Alphabet (GOOGL) are the top global online travel agents. Results could also impact other online travel agents, such as Ctrip (CTRP), Travelzoo (TZOO) and TripAdvisor (TRIP).
  • Expedia shares have a 1-day average price change on earnings of 6.05%. Options are pricing in an implied move of 4.93% off earnings.

Recent News

  • 06/28: Citi upgraded Expedia to Buy from Neutral on expectations for growth to accelerate starting in 2Q17 through 2018, a more confident in the long-term outlook for HomeAway and the ability to accelerate buybacks and/or make additional strategic acquisitions, according to a post on StreetInsider.com.
  • 06/21: Needham & Company reiterated a Buy rating on Expedia but believes there is more downwards earnings risk over the near term (i.e., June and September quarters), which is OTA’s busy season, representing about 65% of annual EBITDA. The market is underestimating the negative global publicity tied to the February 2017 US travel ban, even though US courts have stymied implementation, according to a post on StreetInsider.com.
  • 06/14: Cowen reiterated an Outperform rating on Expedia, as Hyatt (H) is reportedly threatening to exit Expedia by July 31 after failed negotiations, and is threatening to raise owner fees by 7% to fund other channels, according to a post on StreetInsider.com.
  • 05/18: Raymond James applauds Expedia’s growth, but thinks that competition from Priceline and Airbnb will continue to be tough. Wall Street may be overestimating just how fast the company can grow amid a still-competitive online booking market, according to a post on Barron’s.com.

Technical Review

Expedia made an all-time high of $156.39 in June. Balance area support is centered around $148. 2016 saw the stock struggle, so the sharp move up in 2017 leaves the previous balance at $122. (Chart courtesy of StockCharts.com)

Summary

Expedia’s revenue generation comes mostly from U.S. travel, so the dollar reversing the long-term uptrend would seem somewhat worrisome. Airbnb fears appear to have been overblown but Google is already making an impact. Stock buybacks picked up since the lull in 2015. Insider selling abated the past six months. Historically, the company has shown an ability to act ahead of turning points. Expedia has beaten and missed earnings estimates by an average of 8c the last four quarters but the last three quarters were misses.  Estimize consensus for an Adjusted EPS of $0.96 on revenue of $2.561 bln compares to analyst consensus of $0.93 on revenue of $2.54 bln.

 

DISCLAIMER:  By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.